Usage of financial services targeted for consumption is thriving

According to the Estonian Financial Services Market Overview compiled by the Financial Supervision Authority the volume of services issued to finance consumption grew notably in the first half-year of 2016. The increase in voluntary long-term financial services designed for saving and investing was much more moderate.

“As the data from creditors has been added to the overview, we can now for the first time provide a closer picture of the non-bank creditors market by showing their service volumes and market shares”, said Andre Nõmm, Member of the Management Board of the Financial Supervision Authority. “Next to the regulated financial market we can also see a growth in the alternative crowdfunding area, but their data is not included in this overview. As opportunities and risks always go hand-in-hand in every kind of investments, the Financial Supervision Authority has put forth a proposal to regulate the activities of crowdfunding companies by law”, added Nõmm. “We believe that by addressing the activity requirements and risks more directly through laws helps to create a more transparent and effective crowdfunding market.”

According to the overview compiled by the Financial Supervision Authority the stock of the loan portfolio of banks increased 3% or by 0.6 billion euros in the first half-year of 2016, amounting to 17.3 billion euros at the end of June. The volume of loans issued by creditors, who are under financial supervision since 21 March when the law came into force, was 0.7 billion euros as at the end of June. The largest share or 79% of these loans were issued by companies related to banks and the remaining market or 21% has been covered by creditors that are not related to banks. At the end of June 2016, the average value of a loan contract was 4,817 euros for companies related to banks and 491 euros for other creditors.

The balance of deposits in banks increased 3% or by 458 million euros in the first half of 2016, reaching 16 billion euros at the end of June. Companies held 42% and private persons 41% of all deposits. The growth in deposits has continuously been supported by demand and overnight deposits: as the interest rates are low, the share of these deposits increased from 77% to 81% over the year. At the same time, the share of fixed-term and savings deposits decreased from 22% to 19%. The balance of private persons’ deposits has grown significantly in annual comparison: from 6.2 billion euros at the end of June of last year to 6.6 billion euros this year.

The growth of volumes in investment services has slowed. An exception is pension funds, whose combined volume of assets increased 9% in the first half-year, reaching 3 billion euros. The growth in the fund sector has continued to be driven by mandatory pension funds. In the first half of 2016, the volume of their assets increased by 251 million euros or 10%, reaching 2.9 billion euros by the end of June. In terms of growth, the mandatory pension funds are followed by property funds: the volume of their assets increased by 58 million euros or 26% in the first half of 2016, reaching 281 million euros at the end of June. The growth of the volume of property funds has been supported by added new investors as well as the increased value of portfolios.

The volume of insurance premiums in life insurance decreased 4% in the first half-year of 2016 and amounted to 41 million euros. The product with the largest volume is still unit-linked life insurance that accounted for 31% of life insurance products. At the same time, the volume of insurance premiums received in non-life insurance increased 9% and amounted to 149 million euros. The biggest growth occurred in motor third party liability insurance and property insurance, showing an increase in the first half-year compared to the year before 4 million and 3 million euros, respectively.

The financial assets of Estonian resident individuals exceeded their liabilities: the volume of financial assets was 9.7 billion euros as at the end of June 2016, while the balance of financial liabilities amounted to 8.1 billion euros. Consequently, the net financial assets of Estonian resident individuals amounted to 1.6 billion euros. The average volume of assets of an Estonian resident individual was 7,375 euros and the balance of loans was 6,132 euros as at the end of June of 2016. The average net financial assets was thus 1,243 euros.

A more detailed overview of different sectors and service providers is available in the Financial Services Market Overview.